Assessing Digital Technology Development in Latin American Countries: Challenges, Drivers, and Future Directions

1. Introduction

In the context of a changing external environment and the rapid introduction of digital technologies into all spheres of society, the processes of digitalization of the economy are becoming an important task for every modern state. The digital economy and economic growth are closely linked today due to the increasingly large-scale access of companies to global markets, reduced transaction costs, and increased labor productivity, which allows them to become more effective participants in international economic relations. However, digitalization processes are currently occurring differently in all regions of the world. Thus, more active dynamics are observed in developed Western countries, as well as in the newly industrialized countries of East and Southeast Asia. In Latin America, although positive trends have emerged in this area, the countries of the region are significantly lagging behind the advanced countries of the world in terms of digitalization.

Digital technologies are rapidly advancing globally, impacting various areas, including production, e-commerce, e-government, education, telemedicine, the use of big data and artificial intelligence, climate tech, etc. The processes of digital transformation and digitalization in Latin America are uneven, both in individual technologies and in individual states of the region. This has led to the fact that by now the region is experiencing the phenomenon of the so-called “digital inequality.” Some countries are far ahead of their neighbors, who previously neglected digital development. This situation further exacerbates economic inequality in the region, the problem of which is quite acute in Latin America.

In this sense, it is important for Latin American countries to not only study the experience of developed countries in terms of digitalization (USA, Singapore, Germany, Great Britain, Sweden, Switzerland, etc.) but also of specific countries in the region that have successful digital implementation and transformation in different areas, resulting in good management of their economies.

Currently, there are not many scientific works that carry out a comprehensive analysis of the development of the digital economy in Latin American countries, and studies by specialists from around the world, for example, in Russian-language literature, are few. Among the publications that somehow consider the key aspects of digitalization in the countries of the Latin American region, we can note the studies of such Russian authors as Abramov V.I., Malanicheva N.V. (Abramov et al., 2023), Simonova L.N. (Simonova, 2017, 2022, 2023), Davydov V.M. (Davydov, 2016), Pichkov O.B. (Pichkov et al., 2021), Ermakova A.R. (Ermakova, 2022), Katz R., Kallorda F. (Katz et al., 2018), Cretsu O.V., Zakharova A.S. (Cretsu et al., 2020), Koval A.G. (Koval, et al., 2020), Lavut A.A. (Lavut, 2020), Pashentsev E.N. (Pashentsev, 2019), Smal S.V. (Smal, 2021), Stadnik I.T., Tsvetkova N.L. (Stadnik, et al., 2021), Yakovlev P.P. (Yakovlev, 2020, 2022). In the scientific literature in foreign languages, this topic was covered by Cordella A., Paletti A. (Cordella, et al., 2019), Dempsey C. (Dempsey, 2020), Garcia I. (Garcia, 2017), Katz R. (Katz, 2015), Kosevich E. (Kosevich, 2020), Pena I. (Pena, 2021), Razumovsky D.V., and Moseykin Yu.N. (Razumovsky, et al., 2022), and Verma R. (Verma, 2017). However, these works lack a comprehensive analysis of the level of development of the digital economy at the national level and do not present possible options and scenarios for its development.

2. Methodology and Data

This research employed an index-based methodology using several international indices reflecting regional digital processes: the Digital Competitiveness Index (IMD World Digital Competitiveness Ranking), Networked Readiness Index, Inclusive Internet Index, and Global E-Government Development Index. The method of summing up the places was used to classify the countries according to the level of the factors studied. The authors’ methodology was used as a source of information for the analysis of the countries, in addition to the following databases: UN, Economic Forum, Statista Portal, World Bank, GSM Association Intelligence, United Nations Economic Commission for Latin America and the Caribbean, United Nations Development Programme, UNCTAD, and others.

3. Results and Discussion

Several international indices reflect digital technology development, most notably the Digital Competitiveness Index, the Network Readiness Index, the Inclusive Internet Index, and the e-Government Development Index. These indices are based on various analytical factors. Table 1 compares the rankings of 17 Latin American countries using these indices. It should be noted that the data for some countries is unavailable because of their small size or insufficient data collection. The Digital Competitiveness Index and the Network Readiness Index use a point system with a maximum score of 100. The Inclusive Internet Index and e-Government Development Index use a country’s ranking out of 100 and 193 countries, respectively.

Next, the sum of places method was applied, and the average rating score was calculated, according to the results of which all countries of the region were distributed (Table 2). As a result of the study using the index method, it was concluded that Uruguay, Chile, Brazil, and Argentina occupy higher positions in the ratings.

It is relevant to observe that international indices employ diverse analytical factors that are dependent upon the study’s specific focus. Therefore, an objective and thorough assessment of digital technology development requires the consideration of the most complete range of factors. Based on the analysis of these indices, six key factor groups influencing the level of digitalization in Latin American countries were identified: “digital infrastructure,” “human capital,” “Internet usage by citizens,” “Using digital technologies in business,” “Digital government services,” and “economy.” These factor groups were further disaggregated into individual assessment factors (Table 3).

Source: developed by the authors.

For analytical purposes, Table 4, Table 5, Table 6, Table 7, Table 8 and Table 9 indicate each country’s rank within the studied group for each factor in parentheses. For example, Brazil’s number of Internet users (in millions) is 187.9 (1), meaning it ranks 1st among the 19 countries. The final column presents the total scores for each country. Consequently, lower scores indicate a higher ranking in Table 4, Table 5, Table 6, Table 7, Table 8 and Table 9.

This study identified factors influencing digital infrastructure development, including the number of Internet users, the number of fixed broadband subscribers, the average speed of fixed broadband Internet, the price per 1 GB of traffic, and others (Table 4).

Digital economy development requires an educated workforce with strong digital skills. The growth of higher education has a positive impact on overall well-being, and the development of the digital economy enhances this effect, especially at the provincial and city levels, suggesting that people with higher education can significantly benefit from the development of the digital economy (Zhang & Wang, 2024). Accordingly, this study considered factors related to human capital: the level of higher education, the literacy rate, the number of cybersecurity personnel, and others (Table 5). It is also important to note that individuals with higher education are more likely to contribute to digital economy development, while those without it often use the internet primarily for communication (social media).

Next, a group of this study also considered factors related to citizen internet use: internet adoption rates, the use of health and education apps, and the proportion of online shoppers. These factors directly influence the development of information technologies in e-commerce, education, healthcare, and e-government by increasing service demand in these sectors (Table 6).

The speed and scale of digital technology adoption also depend on their use in business, which drives demand for IT services. This analysis included factors such as e-commerce revenue, the density of fintech platforms, online banking penetration, social media advertising costs, and others (Table 7).

Factors related to digital government services as the duration of online service provision, the use of digital channels for document processing, and cybersecurity, are particularly important for accelerating digital government development (Table 8)

This study also considered factors related to the economy: ICT exports and imports, high- and medium-tech production, and others (Table 9). These factors can serve as predictive indicators for future digital technology development in the region.

Next, an analysis of influential factors was conducted. It revealed that the leading Latin American countries (Chile, Uruguay, Argentina, Costa Rica, and Colombia) generally exhibit advanced public administration, education, healthcare, and a well-developed business environment. These countries of the first group have long-standing digital development plans, actively support the development of digital technology, and adopt international best practices in ICT. The second group, with average digital technology development, includes states that have made some progress in developing their ICT infrastructure, though it remains insufficient. However, these countries have a significantly higher rate of internet access than the Latin American average, indicating good potential for future development. Finally, the third group, with low digital technology development, includes countries where these technologies are growing slowly; if current trends continue, the gap between the leaders and the Dominican Republic, Paraguay, Bolivia, Guatemala, Honduras, and Venezuela will widen further.

The heterogeneity in the level of development of digital technologies in the countries of the Latin American region, recorded as a result of the author’s research, has several explanations. Firstly, it is worth highlighting the degree of influence on the different states of the region of the economic and political crises, which have been especially acute in the last decade. Another key factor was the lack of interest in digital technologies among the leaders of several Latin American countries in the 2000s when more active processes of development of digital technologies began in the world. For example, the “maturity levels” of digital government in the countries of the region are significant today (Neverov, 2021).

The geographical features of the region, such as the inaccessibility and remoteness of mountainous areas in some Latin American countries (Peru, Ecuador), hinder the widespread dissemination of ICT. Based on the factors identified, key problems in digital technology development include poor internet service quality, with limited 4G and 5G access and high costs in many Latin American countries; low levels of e-commerce development; insufficient digital skills among the population; weak e-government development; and a lack of institutions for technology innovation.

Given the current situation related to the heterogeneity of digital technology development in Latin America, as well as external and internal factors, we can consider the prospects for the development of such technologies from the point of view of several scenarios. Thus, we have proposed three possible scenarios for this area, namely: positive, negative, and neutral (Table 10).

Thus, under the positive scenario, leading countries in the region (primarily Chile, Uruguay, and Argentina) will experience accelerated digital technology development, alongside a significant breakthrough in digitalization in lagging countries (Dominican Republic, Paraguay, Bolivia, Guatemala, Honduras, and Venezuela). The negative scenario predicts a slowdown in the rate of digital technology development in leading countries and sluggish digital progress in lagging countries today. Even though both positive and negative development scenarios today remain probable for Latin America, due to the conditions of instability of the external environment and serious transformations of the world economy, we think the neutral scenario is more likely. This scenario entails steady but moderate and stable growth of digital technology development in leading countries and faster progress than currently seen in lagging countries. In this case, overall, this suggests a relatively stable pace of digital technology development in Latin America, rather than a sharp increase.

4. Conclusions

Digitalization has affected all Latin American countries, but uneven development is now clearly evident across the region. To assess digital technology development, this study analyzed six factor groups reflecting the current situation “digital infrastructure,” “human capital,” “Internet usage by citizens,” “Using digital technologies in business,” “Digital government services,” and “economy.” Less developed Latin American countries lag behind leading countries by a factor of 5-10 based on certain digital technology assessment criteria. This analysis classified countries with low digital technology development as: the Dominican Republic, Paraguay, Bolivia, Guatemala, Honduras, and Venezuela; countries with average development as: Peru, Brazil, Mexico, Panama, El Salvador, and Ecuador; and leading countries as: Chile, Uruguay, Argentina, Costa Rica, and Colombia. The leading countries are characterized by governments that have adopted large-scale digital technology development programs, promoted internet access expansion, supported IT companies, allocated significant public funding for digitalization projects, and stimulated private investment in this sector. Despite the relatively stable pace of digitalization across Latin America, the region’s prospects remain unclear. This is due to several factors, including uncertainties about global economic stabilization and geopolitical trends. Therefore, this article proposes three possible scenarios for digital technology development in Latin America: positive, negative, and neutral, with the neutral scenario appearing most likely over the next five years.

The theoretical insights and practical conclusions of this study can enhance the understanding of digitalization in Latin American countries and be valuable for both researchers studying economic development in the region and business professionals planning digital technology projects there.